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The regulatory agency overseeing the enforcement of securities law in Ontario has initiated regulatory action against the crypto exchange Polonies. The Ontario Securities Commission accused the Seychelles-based company of failing to comply with Ontario securities law and wants it to cease its operations.
The Ontario Securities Commission (OSC) published a statement of allegations against Poloniex on Tuesday accusing the firm of not registering as a crypto exchange. “Poloniex has engaged in, or held itself out as engaging in, the business of trading in securities without the necessary registration or an applicable exemption from the registration requirement, contrary to subsection 25(1) of the Ontario Securities Act, RSO 1990, c. S.5, as amended (the Act),” the regulator wrote.
Despite not having registered its business with the OSC, Poloniex encouraged people to use its services and allowed Ontario residents to trade in various crypto assets. “The crypto assets available on the platform include, among others, Bitcoin and Ether,” the agency noted.
The regulator argued that Poloniex is subject to Ontario securities law because the products being offered on the platform are considered securities and derivatives. “While Poloniex purports to facilitate trading of the crypto assets in its investors’ accounts, in practice, Poloniex only provides its investors with instruments or contracts involving crypto assets. These instruments or contracts constitute securities and derivatives,” the OSC explained.
Aside from its failure to register with the OSC, Poloniex also did not file a prospectus with the Commission nor filed for an exemption. “Poloniex has engaged in trading in securities which constitute distributions without complying with the prospectus requirements and without an applicable exemption from the prospectus requirements, contrary to section 53 of the Act,” the OSC said.
The OSC issued a press release on March 29, 2021, that notified crypto trading platforms offering securities and derivatives to individuals or corporations in Ontario to comply with the Canadian province’s securities law or face regulatory action. However, Poloniex did not contact the Commission by April 19, 2021, which was the deadline set for compliance.
Considering the firm’s non-compliance, the Enforcement Staff recommended “that Poloniex cease trading in any securities or derivatives permanently or for such period as is specified by the Commission” and that the company must “be prohibited from acquiring any securities permanently or for such period as is specified by the Commission.” The crypto exchange will also have to pay an administrative penalty of not more than 1 million Canadian dollars for each failure to comply with securities law.
